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Determining the ROI for Safety

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  • 1. Determining the ROI for Safety JB Titus, CFSE President JB TITUS & ASSOCIATES
  • 2. Agenda
    • Introduction
    • Current machine safety situation
    • Brief history / evolution of functional safety
    • Research overview & conclusions
    • The new “ROI Tool” basics
    • Live demo
    • Q & A
    Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 3. Customer Feedback
    • Customers are asking for help in determining their ROI for capital projects with integrated safety systems that can:
    • Reduce injury related costs
    • Improve productivity
    • Improve operational costs
    • and……
    Improve their competitive advantage Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 4. Machine Safety – current situation
    • Machine Safety is becoming a core function delivering significant business & economic value:
            • Boosting productivity
            • And, the bottom line
    Nearly ten years of application success stories Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 5. Evolution / History
    • In 2002, NFPA 79, Electrical Standard for Industrial Machinery, changed – allowing safety automation in domestic manufacturing.
      • Hardwiring safety components was no longer the only solution
      • The door opened for new safety certified automation products :
    Safety PLC’s, Safe Drives, Safe Motion, Safety Field Bus, etc. Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 6. Evolution – adoption & challenges Determining economic value ? Challenges Risk Assessments, New Technologies, New Standards, New Practices, OSHA, Change 2002 Present Copyright © 2011 Rockwell Automation, Inc. All rights reserved Adopters Four Stages of Adoption Market Wide Adoption
  • 7. Evolution / History – a concept Technology & Reliability Time 1970 2002 General Automation Technology Machine Safety Technology Unplanned Downtime Integrated Automation With Safety “ The Machine Safety Technology Landscape” Confidential Property of JB TITUS & ASSOCIATES Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 8. Evolution / History – new influences
    • Updated safety standards
    • Emerging Business Initiatives
      • OEE (Overall Equipment Effectiveness)
        • Availability, Performance, Quality
    (2002 to Present) Impacting Your Safety Culture Copyright © 2011 Rockwell Automation, Inc. All rights reserved NFPA 79 RIA 15.06 15.06 IEC 61508 ANSI B11.0 ISO 10218-1 & 2 IEC 62061 ANSI B11.1 S - 2 EN ISO 13849-1 ANSI B11.19 ISO 12100 IEC 60204-1
  • 9. Evolution / History – today
    • Safety integrated vs hardwired
    • Integrated components / functions
    • Integrated diagnostics
    • Safety field bus
    • Safe motion
    • Safety sensors
    • Safety I/O
    Machine Safety can reduce injuries & increase productivity --- Improved Bottom Line --- Integrated Safety Solutions = Cost Savings The Value Proposition Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 10. Customer Testimonials
    • “ There’s not a day that goes by that I don’t equate a savings in some shape or form with our safety systems!”, Mike Douglas, Sr. Manager & Consultant Global Health & Safety, Design, Standards & Technology
    • “ A historical lack of accidents does not imply a current presence of safety. It simply means you’ve been faster than the machine .”, Bill Hilton, Director of Health and Safety
    • “ We took an order in May for a new machine, and we were able to deliver it by the middle of September – half the time it previously took .”, Thomas Butler, Managing Director, T. Butler Engineering
    • “ Thanks to Rockwell Automation Integrated Architecture, we only require one supplier .”, Roggero Magagni, Commercial Manager, Barilla Ivano Ondenei, Software Engineer, Barilla
    Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 11. A New ROI Tool – addressing economic value
    • Existing ROI Tools do not exist for integrated safety solutions
      • Injury related costs, or productivity impacts
    • A new comprehensive tool is needed:
      • It must be flexible and easy to use
      • It must address the value proposition of “Integrated Safety Solutions”
        • Combining both injury & productivity data
      • It needs to address the EH&S concern for injury data
      • It needs to provide a credible result
    The ROI Tool – Way Forward ROI = Benefits ÷ Costs = % (Annualized) Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 12. ROI Tool – injury data research
      • http://www.osha.gov/OshDoc/data_General_Facts/jobsafetyandhealth-factsheet.pdf
      • Why should everyone be concerned about job safety and health?
        • Each year, approximately 6,000 employee deaths in industry
        • Another 50,000 die from illnesses caused by exposure to workplace hazards
        • Approximately 6 million workers suffer non-fatal workplace injuries
        • The annual cost to U.S. businesses of more than $125 billion
    Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 13. ROI Tool – injury data research
    • Research example sites:
    • White papers, articles, etc.
      • “ Accident Costs (Rethinking ratios of indirect to direct costs)” – by Fred A. Manuele
      • “ A zero accident culture can impact profit margins”, Zurich Insurance
      • “ 2010 Liberty Mutual Workplace Safety Index”, Liberty Mutual Research Institute For Safety
    • Workers Compensation
      • State specific
      • Injury categories
      • Company accident history
    • Interviews
    Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 14. ROI Tool – injury data research
    • OSHA – Bureau of Labor and Statistics http://www.bls.gov/iif/oshwc/osh/os/ostb2435.pdf
      • Table 1. Incidence rates 1 of nonfatal occupational injuries and illnesses
      • by industry and case types, 2009
      • 34 pages of industries
    Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 15. ROI Tool –injury data research
    • BLS (Injuries, Illnesses, and Fatalities) http://www.bls.gov/iif/oshsum.htm
      • Accumulated industry data since 1994
      • Everything…..a wealth of information
    Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 16. ROI Tool – injury data research
    • Some web based tools:
      • National Security Council - http://www.nsc.org/news_resources/injury_and_death_statistics/Pages/EstimatingtheCostsofUnintentionalInjuries.aspx
      • OSHA Stats & Data - http://www.osha.gov/oshstats/index.html
      • Injury Cost Calculator - http://www.safetymanagementgroup.com/injury-cost-calculator.aspx
      • Utah Safety Council - http://www.utahsafetycouncil.org/content.asp?id=201
      • OSHA Fact Sheet - http://www.osha.gov/OshDoc/data_General_Facts/jobsafetyandhealth-factsheet.pdf
      • OSHA incident rate calculator - http://www.safetymanagementgroup.com/osha-incident-rate-calculator.aspx
      • ATI (ROI Calculator) - http://www.automatedtestinginstitute.com/home/index.php?option=com_content&view=article&id=58&Itemid=65
      • National Council on Compensation Research - https://www.ncci.com/NCCIMain/Pages/Default.aspx
    Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 17. ROI Tool –injury data research summary Research revealed a Ratio “Range” of 2 : 1 to 14 : 1 Indirect Costs vs Direct Costs Copyright © 2011 Rockwell Automation, Inc. All rights reserved Indirect Costs Direct Costs
    • Lost productivity
    • Medical expenses
    • OSHA fines
    • Rehabilitation expenses
    • Repairs to property
    • Wages to workers
    • Temporary employees
    • Worker’s Compensation
    • Accident investigation
    • Insurance/legal expenses
    • Corrective action
  • 18. ROI Tool – injury data research results
    • The new ROI Tool will:
      • Provide a default ratio of 2 : 1
      • Provide a user selectable ratio from 1 : 1 to 14 : 1
      • Consider reducing Indirect and Direct Injury Costs as benefits
      • Allow zero (0) entries for both Indirect and Direct Injury Costs
    Indirect Costs vs Direct Costs Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 19. ROI Tool – productivity data research
    • Influence - Safety standards allow safety automation products (“listed for such use”) to be used for safety-related functions since 2002.
    • White papers, case studies, & interviews
      • Example result - Using GuardLogix controllers instead of traditional safety relays helped GM greatly reduce installation and debug times for new body-shop equipment. Previously, wiring for a typical five-robot cell required 640 wires/cables; with the GuardLogix system, the wiring was reduced to a five-wire cable. Furthermore, the plug-and-play functionality and debug features reduced installation and maintenance time and costs. “GM’s Road To Safe Manufacturing””
    • Business metrics – can Overall Equipment Effectiveness (OEE) be applied?
    Economic Value & Integrated Safety Solutions Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 20. ROI Tool – productivity data research
    • OEE is an innovative method to measure productivity performance. More specifically, it is a statistical metric to determine how efficient a machine is running.
    • OEE is calculated by multiplying together:
        • Availability x Performance x Quality = OEE
    • The combination is the value a machine contributes to the production process.
    What is OEE? Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 21. ROI Tool – productivity data research
    • Availability = ( Planned Production Time – Unplanned Downtime)
    • (Planned Production Time)
    • Performance = (Cycle Time x Number of Products Processed)
    • (Production Time)
    • Quality = (Number of Products Made – Number of Products Rejected)
    • (Number of Products Made)
    What is OEE? Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 22. ROI Tool – productivity data research
    • OEE is calculated by multiplying together:
        • Availability x Performance x Quality = OEE
    • Example - 90% x 95% x 99.5% = 85.1% OEE
    • So what?
      • A recent Aberdeen Group study surveyed 236 manufacturing executives
        • Best-in class had 4%
        • less unscheduled
        • downtime.
        • Industry average
        • Laggard
    What is OEE? Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 23. ROI Tool – productivity data research
    • Availability - Goal is to demonstrate that “integrated safety solutions” can reduce unscheduled downtime of a machine. This reduction can then be calculated into “unscheduled downtime savings” via the following variables:
      • Unscheduled Downtime per Week in minutes
      • Operations Cost of Downtime per minute(not including lost production)
      • Weeks of Unscheduled Downtime per year
      • Reduction Factor of all unscheduled downtime that is attributable to the proposed integrated safety solution. A default of 4% is built into the calculation (Aberdeen Group Study).
      • Note - Unscheduled downtime is caused by several factors such as; mechanical and "other" breakdowns, material shortages, scheduling issues, intermittent connections, miss-feeds, jams, operator or maintenance mistakes, etc.
    Translating OEE to the Balance Sheet Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 24. ROI Tool – productivity data research
    • Performance - Goal is to demonstrate that the “integrated safety solution” can improve the production levels of a machine by driving more machine "up time" and/or greater cycles per period (hour, shift, day, week, etc.). This increase in production can then be calculated into “increased profit” to the bottom line via the following variables:
      • Increased Units Produced per Week
      • Scheduled Production Weeks per year
      • Profit Contribution dollars per unit
    Translating OEE to the Balance Sheet Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 25. ROI Tool – productivity data research
    • Quality – Our research thus far has not supported a definitive relationship to first run quality produced parts as relates to the “integrated safety solution”. Therefore, we have not included any developed algorithms that would equate a quality impact to a company's balance sheet that directly relates to an “integrated safety solution” investment.
    • We are considering an updated ROI Tool revision that could address improved quality and the related improvements to the bottom line.
    Translating OEE to the Balance Sheet Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 26. ROI Tool – capital investments & depreciation
    • Capital Investment – the “integrated safety solution” investment can drive a new depreciation schedule
      • Complete machine control & functional safety system upgrade
      • Functional safety system upgrade
    • Applying Depreciation
      • An expense write-off
      • An investment benefit
    Depreciation’s impact to the Balance Sheet Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 27. ROI Tool – productivity data research results
    • The new ROI Tool will:
      • Provide fields for entering project related data as prompted
      • Provide a default reduction factor of 4% for reduced unscheduled downtime with user input capability
      • Provide a depreciation default of 10 years with user input capability
      • Allow zero (0) entries as needed for any user
    Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 28. ROI Tool – project cost
    • Integrated Safety System - scope of supply
      • Controls, software, field devices, cabinets, installation, training, etc.
    Integrated Safety Systems are proven to improve productivity, safety & the bottom line Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 29. ROI Tool - basics
    • ROI Tool Development Objectives:
    • Introduce a simple but comprehensive algorithm with expansion capability
    • Results need to be credible
    • Provide web based access
    • Provide an off-line work sheet
    • Typical users:
      • EH&S executives & staff
      • Operational management
      • Safety engineers
      • Project engineers
    Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 30. ROI Tool – basics “work sheet” Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 31. RA Safety Portal – landing page Copyright © 2011 Rockwell Automation, Inc. All rights reserved http://discover.rockwellautomation.com/safety
  • 32. ROI Tool Summary
    • A new comprehensive ROI tool is here:
    • It is flexible and easy to access on the web
    • It is easy to use and an off-line work sheet is provided
      • It addresses the value proposition of “Integrated Safety Solutions”
      • It addresses the EH&S concern for injury data
      • It applies to all industry segments
      • It provides a credible result by combining injury data & productivity data in one tool
    Customers can now determine their ROI for capital projects with integrated safety systems Copyright © 2011 Rockwell Automation, Inc. All rights reserved
  • 33. Questions ?
  • 34. Thank You! JB Titus, CFSE President JB TITUS & ASSOCIATES

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